To Adjudicate or Not to Adjudicate? Issues of Jurisdiction and Comity in the U.S. Volkswagen Litigation

Emily Golding, Vol. 37 Associate Editor

In September, news that over 11 million Volkswagen diesel vehicles worldwide had been equipped with software used to defeat emissions tests rocked the international community. In the days following the publication of the scandal, Volkswagen stock dropped nearly 30%.[1] The deception by the world’s top-selling car maker continues to affect not only its shareholders and its customers, but its reach extends to governments, international regulating bodies, and the international motor industry as a whole. The worldwide impacts of this scandal present important questions of international law.  Exactly who holds a stake in the resolution of the scandal? Which governing bodies have the authority to investigate what conduct? Where are claims properly adjudicated? Resolution of the Volkswagen scandal undoubtedly requires international cooperation, and a crucial aspect of proper resolution involves this third issue: deciding which jurisdictions should adjudicate which claims.  Where and how claims are resolved has significant financial repercussions all around. The importance of this third question is highlighted by the recent filing of a class action lawsuit in the U.S. District Court for the Central District of California on behalf of South Korean consumers. The action was commenced on October 23, 2015 by two U.S. law firms and is the first to be brought in the U.S. by a wholly foreign group of Volkswagen and Audi customers.[2] The complaint names Volkswagen Group of America, Inc., Audi AG, and Volkswagen AG as defendants.[3]  The class alleges that over 125,000 affected vehicles were sold in South Korea,[4] and it seeks injunctive relief in the form of a recall or free replacement program, costs, restitution, and damages (including punitive damages).[5] South Korea is one of nine countries worldwide that have implemented comprehensive environmental standards similar to those in the United States.[6]  Like the United States, South Korea launched its own investigation into the emissions levels of Volkswagen vehicles soon after news of the scandal broke.[7]  Unlike the United States, however, traditional class action lawsuits are not permitted in South Korea.[8]  Each member of the affected class must individually file a complaint against the automaker.[9]  Although this process appears discouraging for class plaintiffs, a group of over 100 South Korean Audi customers filed actions against Volkswagen and its Korean counterpart with the Seoul district court mere days before the initiation of the U.S. action.[10] South Korea clearly has an interest in resolving its own citizens’ claims against Volkswagen.  Allowing the recently filed U.S. class action to proceed is not only improper under recent jurisdictional standards articulated by the U.S. Supreme Court, but it also hinders the proper resolution of this international ordeal. Importantly, because actions have already been filed in South Korea relating to the same injury, an expansive jurisdictional view by U.S. courts over this action would impede international comity. The complaint, captioned Jung v. Volkswagen Group of America Inc.,[11] states that jurisdiction is retained pursuant to the Class Action Fairness Act of 2005 “because the proposed Class consists of 100 or more members; the amount in controversy exceeds $5,000,000, exclusive of costs and interest; and minimal diversity exists.”[12]  Although the Act does allow foreign plaintiffs to file class actions in the United States if they meet the standards set out,[13] the question as to whether jurisdiction is proper remains compelling. Jurisdictional doctrines in the U.S. have certainly developed significantly over the course of the last century, yet one concept remains unchanged: a finding of proper personal jurisdiction always hinges on the relationship of the defendant to the forum. As the Jung plaintiffs’ complaint concedes, Volkswagen Group of America is incorporated in the State of New Jersey and has its principal place of business in Herndon, Virginia.[14]  Plaintiffs, however, argue that jurisdiction is proper in California because the entity does business “in all 50 states”[15] and has a “Test Center” located in the District.[16] Volkswagen AG and Audi AG, the other named defendants, are both incorporated and retain principal places of business in Germany.[17]  Therefore, plaintiffs’ entire jurisdictional claim in the United States appears to hinge on the relationship of the American subsidiary of Volkswagen to the California forum. The Supreme Court’s recent decisions in Goodyear Dunlop Tires Operations, S.A. v. Brown[18] and Daimler AG v. Bauman[19] weigh against the finding of personal jurisdiction over the defendants in California. Both cases involved issues of general jurisdiction, and in each the Court found that an out-of-state corporation that is sued for an injury not directly related to the specific forum cannot be considered “at home” in the forum under a theory of general jurisdiction simply because it conducts a certain amount of business in that state. “A corporation that operates in many places can scarcely be deemed at home in all of them.”[20]  This means that, except in rare circumstances, a corporation is only considered “at home” in either its state of incorporation or in the state where it holds its principal place of business.[21] Under this recent precedent, the plaintiffs’ jurisdictional claims do not meet the high standard of Goodyear and Diamler in showing that Volkswagen Group of America, let alone Volkswagen AG and Audi AG, is “at home” in California.[22] Even if the plaintiffs had sued the defendants in either New Jersey or Virginia, making jurisdiction more plausible, their claims appear too attenuated for the U.S. to exercise its enforcement jurisdiction in good faith.  The plaintiffs make several substantive allegations against “Volkswagen,” which presumably refers to the German parent company, but their claims against the American subsidy (the “hook” for U.S. jurisdiction) merely allege that the company posted “YouTube links on the front page of Volkswagen Korea’s official website where Korean consumers viewed advertisements made by Volkswagen Group of America.”[23]  They further allege that Volkswagen Group of America’s Chief Operating Officer made misleading statements to an American news source in one instance in 2009 about the advantages of its diesel vehicles over those of hybrid vehicles.[24] Taking the complaint as a whole, the claims against Volkswagen Group of America and the alleged acts that occurred in the United States in furtherance of the international scandal are few and far between compared to those allegations made against the German parent company. That being said, it is unsurprising that plaintiffs chose to file suit in the U.S.  In international litigation, “[b]ecause the U.S. courts uniformly offer such significant procedural advantages to plaintiffs, the United States is almost always the preferred forum.”[25] As noted, the courts in South Korea do not allow the filing of plaintiffs’ claims as a class action lawsuit. Because the U.S. class action procedures “decrease the economic costs of large-scale litigation and subsequently allow large groups of individual plaintiffs, each with little monetary interest in the dispute, to bring suit against a defendant”[26] it is obvious why the South Korean plaintiffs’ forum shopping would lead them to file suit in the U.S.  However, the unavailability of certain procedural methods, like class action filing, in South Korea is of no concern to the U.S. and certainly cannot be considered as a valid basis for adjudication in the U.S. Comity, whether viewed as a principle of customary international law or as something less than law but more than “mere courtesy,”[27] demands that the U.S. forego an expansive jurisdictional view and dismiss the claims of these South Korean citizens on the basis of forum non conveniens in recognition of South Korea’s national sovereignty. Respecting the nation of South Korea and allowing it to adjudicate the claims of all plaintiffs affected by this issue both validates and preserves the legitimacy of South Korea’s interest in a proper resolution of the international scandal.

[1] Paul R. La Monica, Volkswagen Has Plunged 50%. Will It Ever Recover?, CNN (Sept. 25, 2015, 1:06pm), http://money.cnn.com/2015/09/24/investing/volkswagen-vw-emissions-scandal-stock/.  [2] See Amanda Bronstad, Quinn Emanuel and Hagens Berman Sue VW on Behalf of S. Koreans, Nat’l L.J. (Oct. 23, 2015), http://www.nationallawjournal.com/id=1202740637795/Quinn-Emanuel-and-Hagens-Berman-Sue-VW-on-Behalf-of-S-Koreans?rss=rss_nlj&kw=Quinn%20Emanuel%20and%20Hagens%20Berman%20Sue%20VW%20on%20Behalf%20of%20S.%20Koreans&cn=20151024&pt=Weekend%20Edition&src=EMCEmail&et=editorial&bu=National%20Law%20Journal&slreturn=20151001004918.  [3] Complaint at 25, Jung v. Volkswagen Grp. of Am., Inc., No. 15-8300 (C.D. Cal. Oct. 23, 2015). [4] Id. at 2.  [5] Id. at 36.  [6] Id. at 1.  [7] See Kit Tang, Volkswagen Scandal Splits Asia’s Auto Stocks, CNBC (Sept. 24, 2015, 11:57am), http://www.cnbc.com/2015/09/24/hyundai-kia-benefit-from-vw-scandal-nissan-honda-toyota-shares-hit.html.  [8] See Bronstad, supra note 2.  [9] Id.  [10] S. Korean Audi Owners File Class Action Suit Against Volkswagen, The Korea Times (Oct. 22, 2015), http://www.koreatimesus.com/s-korean-audi-owners-file-class-action-suit-against-volkswagen/. [11] See  Complaint, supra note 3.  [12] Id. at 23.  [13] See Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d) (2011).  [14] Complaint, supra note 3, at 25.  [15] Id.  [16] Id. at 23-24.  [17] Id. at 25.  [18] 131 S. Ct. 2846 (2011).  [19] 134 S. Ct. 746 (2014).  [20] Id.  [21] See The Supreme Court—Leading Cases: Diamler AG v. Bauman, 128 Harv. L. Rev. 311, 314 (2014).  [22] The author notes that as of October 28, 2015, the case has been stayed pending a decision by the United States Judicial Panel on Multidistrict Litigation. See Order, Jung v. Volkswagen Grp. of Am., Inc., No. 15-8300 (C.D. Cal. Oct. 28, 2015).  [23] Complaint, supra note 3, at 2.  [24] Id. at 6-7.  [25] Daniel J. Dorward, Forum Non Conveniens Doctrine and the Judicial Protection of Multinational Corporations from Forum Shopping Plaintiffs, 19 U. Pa. J. Int’l Econ. L. 141, 150 (1998).  [26] Id. at 149. [27] Hilton v. Guyot, 159 U.S. 113, 163-164 (1895). The Supreme Court’s view on the principle of comity as being something less than “obligation” but more than a mere showing of “good will” still persists in most U.S. courts today. See also Hanna L. Buxbaum, Territory, Territoriality, and the Resolution of Judicial Conflict, 57 Am. J. Comp. L. 631, 649 n. 77 (2009) (“While the Restatement (Third) of Foreign Relations styles it as a principle of customary international law, comity has to date not been viewed in that light by the majority of U.S. commentators or by U.S. courts.”)